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Chapter 3: 5E (page 131)

EXCEL (Adjusting Entries) The ledger of Duggan Rental Agency on March 31 of the current year includes the following selected accounts before adjusting entries have been prepared.

Debit Credit

Prepaid Insurance \(3,600

Supplies \)2,800

Equipment \(25,000

Accumulated Depreciation- Equipment \)8,400

Notes Payable \(20,000

Unearned Rent Revenue \)9,300

Rent Revenue \(60,000

Interest Expenses -0-

Salaries and Wages Expenses \)14,000

An analysis of accounts shows the following.

  1. The equipment depreciates \(250 per month.

  2. One-third of the unearned rent was recognized as revenue during the quarter.

  3. Interest of \)500 is accrued on the notes payable.

  4. Supplies on hand total \(850

  5. Insurance expires at the rate of \)300 per month.

Instructions

Prepare the adjusting entries at March 31, assuming that adjusting entries are made quarterly. Additional accounts are Depreciation Expenses, Insurance Expenses, Interest Payable, and Supplies expenses. (Omit Explanations)

Short Answer

Expert verified

The amount of accumulated depreciation calculated is $750.

Step by step solution

01

Meaning of Adjusting Entries

Adjusting entries are those journal entries that are made on the last day of an accounting period. Adjusting entries helps a company calculate exact revenue and expenses and it also helps to update the financial statements and fix an error.

02

Adjusting entries on March 31

Date

Accounts Titles and Explanations

Debit

Credit

Mar 31

Depreciation Expenses

$750



Accumulated Depreciation- Equipment


$750


(Adjusting entries for quarterly depreciation on equipment)







Mar 31

Unearned Rent Revenue

$3100



Rent Revenue


$3100


(Adjusting entries for rent revenue earned)







Mar 31

Interest expenses

$500



Interest payable


$500


(Adjusting entries for accrued interest expenses)







Mar 31

Supplies Expenses

$1950



Supplies


$1950


(Adjusting entries for supplies consumed)







Mar 31

Insurance Expenses

$900



Prepaid Insurance


$900


(Adjusting entries for expired insurance for the quarter)



03

Explanations:

  1. Depreciation Expenses = ($250 脳 3) =$750

*[quarterly depreciation = 3 months]

  1. Unearned rent revenue = ($9300 脳 1/3) = $3100

  2. Insurance expenses = $500 (Given)

  3. Supplies expenses (Supplies used in production) = ($2800 - $850) = $1950

  4. Insurance expenses = ($300 脳 3months) = $900

*[quarterly insurance = 3months]

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Most popular questions from this chapter

E3-17 (L02) (Transactions of a Corporation, Including Investment and Dividend) Scratch Miniature Golf and DrivingRange Inc. was opened on March 1 by Scott Verplank. The following selected events and transactions occurred during March.Mar. 1 Invested \(50,000 cash in the business in exchange for common stock.3 Purchased Michelle Wie鈥檚 Golf Land for \)38,000 cash. The price consists of land \(10,000, building \)22,000, and equipment\(6,000. (Make one compound entry.)5 Advertised the opening of the driving range and miniature golf course, paying advertising expenses of \)1,600.6 Paid cash \(1,480 for a one-year insurance policy.10 Purchased golf equipment for \)2,500 from Singh Company, payable in 30 days.18 Received golf fees of \(1,200 in cash.25 Declared and paid a \)500 cash dividend.30 Paid wages of \(900.30 Paid Singh Company in full.31 Received \)750 of fees in cash.Scratch uses the following accounts: Cash, Prepaid Insurance, Land, Buildings, Equipment, Accounts Payable, Common Stock,Dividends, Service Revenue, Advertising Expense, and Salaries and Wages Expense.InstructionsJournalize the March transactions. (Provide explanations for the journal entries.)

Question: Presented below is the trial balance of the Crestwood Golf Club, Inc. as of December 31. The books are closed annually on December 31.


CRESTWOOD GOLF CLUB, INC.

TRIAL BALANCE

DECEMBER 31

Debit

Credit

Cash

\(15,000

Accounts receivables

13,000

Allowance for doubtful accounts

\)1,100

Prepaid insurance

9,000

Land

350,000

Building

120,000

Accumulated depreciation 鈥� building

38,400

Equipment

150,000

Accumulated depreciation 鈥� equipment

70,000

Common stock

400,000

Retained earnings

82,000

Dues revenue

200,000

Green fees revenue

5,900

Rent revenue

17,600

Utilities expenses

54,000

Salaries and wages expenses

80,000

Maintenance and repair expenses

24,000

\(815,000

\)815,000

Instructions

(a) Enter the balances in ledger accounts. Allow five lines for each account.

(b) From the trial balance and the information given below, prepare annual adjusting entries and post to the ledger accounts. (Omit explanations.)

(1) The buildings have an estimated life of 30 years with no salvage value (straight-line method).

(2) The equipment is depreciated at 10% per year.

(3) Insurance expired during the year \(3,500.

(4) The rent revenue represents the amount received for 11 months for dining facilities. The December rent has not yet been received.

(5) It is estimated that 12% of the accounts receivable will be uncollectible.

(6) Salaries and wages earned but not paid by December 31, \)3,600.

(7) Dues received in advance from members $8,900 were recorded as Dues Revenue.

(c) Prepare an adjusted trial balance.

(d) Prepare closing entries and post.

E3-2 (L02) (Corrected Trial Balance) The following trial balance of Wanda Landowska Company does not balance. Yourreview of the ledger reveals the following. (a) Each account had a normal balance. (b) The debit footings in Prepaid Insurance,Accounts Payable, and Property Tax Expense were each understated \(100. (c) A transposition error was made in AccountsReceivable and Service Revenue; the correct balances for Accounts Receivable and Service Revenue are \)2,750 and \(6,690,respectively. (d) A debit posting to Advertising Expense of \)300 was omitted. (e) A \(1,500 cash drawing by the owner was debited to Owner鈥檚 Capital and credited to Cash.

WANDA LANDOWSKA COMPANYTRIAL BALANCEAPRIL 30, 2017

Debit (\)) Credit (\()Cash \) 4,800Accounts Receivable 2,570Prepaid Insurance 700Equipment \( 8,000Accounts Payable 4,500Property Taxes Payable 560Owner鈥檚 Capital 11,200Service Revenue 6,960Salaries and Wages Expense 4,200Advertising Expense 1,100Property Tax Expense 800

Total \)20,890 $24,500

Prepare a correct trial balance.

Listed below are the transactions of Yasunari Kawabata, D.D.S., for the month of September.

Sep. 1

Kawabata begins practice as a dentist and invests \(20,000 cash

2

Purchases dental equipment on account from Green Jacket Co. for \)17,280

4

Pays rent for office space, \(680 for the month.

4

Employs a receptionist, Michael Bradley

5

Purchases dental supplies for cash, \)942

8

Receives cash of \(1,690 from patients for services performed

10

Pays miscellaneous office expenses, \)430.

14

Bills patients \(5,820 for services performed.

18

Pays Green Jacket Co. on account, \)3,600.

19

Withdraws \(3,000 cash from the business for personal use.

20

Receives \)980 from patients on account

25

Bills patients \(2,110 for services performed

30

Pays the following expenses in cash: salaries and wages \)1,800; miscellaneous office expenses \(85.

30

Dental supplies used during September, \)330.

Instructions

  1. Enter the transactions shown above in appropriate general ledger accounts (use T-accounts). Use the following ledger accounts: Cash, Accounts Receivable, Supplies, Equipment, Accumulated Depreciation鈥擡quipment, Accounts Payable, Owner鈥檚 Capital, Service Revenue, Rent Expense, Office Expense, Salaries and Wages Expense, Supplies Expense, Depreciation Expense, and Income Summary. Allow 10 lines for the Cash and Income Summary accounts, and 5 lines for each of the other accounts needed. Record depreciation using a 5-year life on the equipment, the straight-line method, and no salvage value. Do not use a drawing account.
  2. Prepare a trial balance
  3. Prepare an income statement, a statement of owner鈥檚 equity, and an unclassified balance sheet.
  4. Close the ledger
  5. Prepare a post-closing trial balance.

Included in Gonzalez Company鈥檚 December 31 trial balance is a note receivable of \(12,000. The note is a 4-month, 10% note dated October 1. Prepare Gonzalez鈥檚 December 31 adjusting entry to record \)300 of accrued interest, and the February 1 journal entry to record receipt of $12,400 from the borrower.
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